Financial Statements. August 31, 2013 and (With Independent Auditors Report Thereon)

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 Table of Contents Page Independent Auditors Report 1 Statements of Financial Position 3 Statement of Activities Year ended August 31, Statement of Activities Year ended August 31, Statements of Cash Flows Years ended 6 Statement of Functional Expenses Year ended August 31, Statement of Functional Expenses Year ended August 31,

3 KPMG LLP Suite South Hope Street Los Angeles, CA Independent Auditors Report The Board of Directors Make-A-Wish Foundation of Greater Virginia: We have audited the accompanying financial statements of Make-A-Wish Foundation of Greater Virginia (the Foundation), which comprise the statements of financial position as of, and the related statements of activities, functional expenses, and cash flows for the years then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Make-A-Wish Foundation of Greater Virginia as of, and the changes in net assets and its cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles. Los Angeles, California August 11,

5 Statements of Financial Position Assets Cash and cash equivalents $ 169,169 76,803 Investments 15,060 57,080 Due from related entities 188,560 95,771 Prepaid expenses 1,080 3,313 Contributions receivable, net 38, ,524 Other assets 22,077 19,799 Investments held for long-term purposes 63,285 51,122 Property and equipment, net 17,404 14,763 Total assets $ 514, ,175 Liabilities and Net Assets (Deficit) Accounts payable and accrued expenses $ 58, ,845 Accrued pending wish costs 1,089, ,325 Due to related entities 71,089 17,542 Other liabilities 5,593 Total liabilities 1,218, ,305 Commitments and contingencies Net assets (deficit): Unrestricted (836,648) (503,776) Temporarily restricted 82, ,710 Permanently restricted 49,936 49,936 Total net assets (deficit) (703,980) (340,130) Total liabilities and net assets (deficit) $ 514, ,175 See accompanying notes to financial statements. 3

6 Statement of Activities Year ended August 31, 2013 Temporarily Permanently Unrestricted restricted restricted Total Revenues, gains, and other support: Public support: Contributions $ 1,305,284 38,172 1,343,456 Grants 590, , ,353 Total public support 1,895, ,172 2,058,809 Internal Special events 120, ,761 Less costs of direct benefits to donors (51,081) (51,081) Special events, net 69,680 69,680 Investment income, net 12,821 12,163 24,984 Other income 4,897 4,897 Net assets released from restrictions 206,313 (206,313) Total revenues, gains, and other support 2,189,348 (30,978) 2,158,370 Expenses: Program services: Wish granting 2,042,146 2,042,146 Total program services 2,042,146 2,042,146 Support services: Fundraising 321, ,064 Management and general 159, ,010 Total support services 480, ,074 Total program and support services expenses 2,522,220 2,522,220 Change in net assets (deficit) (332,872) (30,978) (363,850) Net assets (deficit), beginning of the year (503,776) 113,710 49,936 (340,130) Net assets (deficit), end of the year $ (836,648) 82,732 49,936 (703,980) See accompanying notes to financial statements. 4

7 Statement of Activities Year ended August 31, 2012 Temporarily Permanently Unrestricted restricted restricted Total Revenues, gains, and other support: Public support: Contributions $ 1,183,305 49,966 1,233,271 Grants 246, ,174 Total public support 1,429,479 49,966 1,479,445 Internal Special events 187,400 62, ,958 Less costs of direct benefits to donors (5,677) (5,677) Special events, net 181,723 62, ,281 Investment income, net 7,836 1,186 9,022 Other income 10,606 10,606 Net assets released from restrictions 61,035 (61,035) Total revenues, gains, and other support 1,690,679 52,675 1,743,354 Expenses: Program services: Wish granting 1,452,386 1,452,386 Total program services 1,452,386 1,452,386 Support services: Fundraising 439, ,563 Management and general 100, ,230 Total support services 539, ,793 Total program and support services expenses 1,992,179 1,992,179 Change in net assets (deficit) (301,500) 52,675 (248,825) Net assets (deficit), beginning of the year (202,276) 61,035 49,936 (91,305) Net assets (deficit), end of the year $ (503,776) 113,710 49,936 (340,130) See accompanying notes to financial statements. 5

8 Statements of Cash Flows Years ended Cash flows from operating activities: Change in net assets $ (363,850) (248,825) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation and amortization 1,223 3,437 Net realized and unrealized gains on investments (21,584) (2,207) Loss on disposal of property and equipment, net 14,762 Changes in assets and liabilities: Contributions receivable 74,352 (57,284) Due from related entities (92,789) (23,701) Prepaid expenses 2,233 (1,000) Other assets (2,278) (400) Accounts payable and accrued expenses (157,801) 103,562 Accrued pending wish costs 557,329 (102,449) Due to related entities 53,547 (1,593) Other liabilities (5,593) (3,099) Net cash provided by (used in) operating activities 59,551 (333,559) Cash flows from investing activities: Purchases of investments (109,436) Proceeds from sales of investments 51, ,771 Purchases of property and equipment (18,626) (5,167) Net cash provided by investing activities 32, ,168 Net increase (decrease) in cash and cash equivalents 92,366 (8,391) Cash and cash equivalents, beginning of year 76,803 85,194 Cash and cash equivalents, end of year $ 169,169 76,803 Supplemental cash flow information: In-kind contributions $ 374, ,823 See accompanying notes to financial statements. 6

9 Statement of Functional Expenses Year ended August 31, 2013 Program services Support services Wish Management Total support granting Fundraising and general services Total Direct costs of wishes $ 1,562,913 1,562,913 Salaries, taxes, and benefits 272, ,298 67, , ,143 Printing, subscriptions, and publications 2,081 42, ,035 45,116 Professional fees 40,077 25,574 64,646 90, ,297 Rent and utilities 49,613 31,876 12,264 44,140 93,753 Postage and delivery 8,306 3, ,071 12,377 Travel 16,021 13,157 2,009 15,166 31,187 Meetings and conferences 2,173 1, ,684 3,857 Office supplies 5,565 3, ,057 9,622 Communications 5,220 3,344 1,271 4,615 9,835 Advertising and media (cash) 27,599 4,951 1,373 6,324 33,923 Advertising and media (in-kind) 5,873 3,760 1,367 5,127 11,000 Repairs and maintenance 2,613 1, ,326 4,939 Membership dues National partnership dues 34,432 5,230 3,923 9,153 43,585 Miscellaneous 6,240 3,997 1,478 5,475 11,715 Depreciation and amortization ,223 $ 2,042, , , ,074 2,522,220 See accompanying notes to financial statements. 7

10 Statement of Functional Expenses Year ended August 31, 2012 Program services Support services Wish Management Total support granting Fundraising and general services Total Direct costs of wishes $ 1,000,836 1,000,836 Salaries, taxes, and benefits 307, ,546 70, , ,072 Printing, subscriptions, and publications , ,684 18,534 Professional fees 66,731 3,032 69,763 69,763 Rent and utilities 58,018 38,261 12,099 50, ,378 Postage and delivery 3,627 3, ,336 7,963 Travel 7,406 4, ,199 12,605 Meetings and conferences 1,413 15, ,197 17,610 Office supplies 6,732 21,806 1,327 23,133 29,865 Communications 3,479 4, ,042 8,521 Advertising and media (cash) 19,128 18, ,979 38,107 Repairs and maintenance 3,002 2, ,713 5,715 National partnership dues 31,601 6,237 3,742 9,979 41,580 Miscellaneous 6,936 8,530 5,727 14,257 21,193 Depreciation and amortization 1,771 1, ,666 3,437 $ 1,452, , , ,793 1,992,179 See accompanying notes to financial statements. 8

11 (1) Organization Make-A-Wish Foundation of Greater Virginia (the Foundation) is a Virginia not-for-profit corporation, organized for the purpose of granting wishes to children with life-threatening medical conditions. The Foundation is an independently operating chapter of Make-A-Wish Foundation of America (National Organization), which operates to develop and implement national programs in public relations and fundraising for the benefit of all local chapters. In addition, the local chapter is obligated to comply with a chapter agreement with the National Organization and such guidelines, resolutions, and policies as may be adopted by the National Organization s board of directors. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The financial statements of the Foundation are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP). (b) (c) (d) (e) Cash and Cash Equivalents The Foundation considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Included in cash and cash equivalents at August 31, 2013 and 2012 are $0 and $56,497, respectively, of certificates of deposit with an initial term of less than three months, and $169,169 and $20,306, respectively, of money market mutual funds. Investments Investments are recorded at fair value. Investment income, including gains and losses on investments, is recorded as increases or decreases in unrestricted net assets unless its use is limited by donor-imposed restrictions or law. Contributions Receivable Unconditional promises to give are recognized initially at fair value as contribution revenue in the period such promises are made by donors. Fair value is estimated giving consideration to anticipated future cash receipts (after allowance is made for uncollectible contributions) and discounting such amounts at a risk-adjusted rate commensurate with the duration of the donor s payment plan. These inputs to the fair value estimate are considered Level 3 in the fair value hierarchy. In subsequent periods, the discount rate is unchanged and the allowance for uncollectible contributions is reassessed and adjusted, if necessary. Amortization of the discounts is recorded as additional contribution revenue. Property and Equipment, Net Property and equipment having a useful life of more than one year are capitalized at cost when purchased. Donated assets are capitalized at the estimated fair value at the date of receipt and restrictions are released once the asset has been placed into service. Property and equipment under capital leases are stated at the present value of future minimum lease payments at the time of acquisition. Depreciation on property and equipment is provided on a straight-line basis over the estimated useful lives of the assets, generally three to seven years. Leasehold improvements are 9 (Continued)

12 amortized over the shorter of the estimated useful life of the asset or the remaining terms of the leases. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are expensed as incurred. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances indicate a long-lived asset may be impaired, the asset value will be reduced to fair value. Fair value is determined through various valuation techniques including quoted market values and third-party independent appraisals, as considered necessary. (f) Fair Value Measurements The Foundation follows the provisions of Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Foundation utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Foundation determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets (or liabilities) that the reporting entity has the ability to access at the measurement date. Level 2 Inputs: Prices for a similar asset (or liability), other than quoted prices included in Level 1 inputs, that are observable for the asset (or liability), either directly or indirectly. If the asset (or liability) has a specified term, a Level 2 input must be observable for substantially the full term of the asset (or liability). Level 3 Inputs: Unobservable inputs for the asset (or liability) used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset (or liability) at measurement date. See additional information in note 3. (g) Net Assets The Foundation s net assets and changes therein are classified and reported as follows: Permanently restricted net assets Net assets subject to donor-imposed restrictions that the principal be maintained in perpetuity. Generally, the donors of these assets permit the 10 (Continued)

13 Foundation to use all or part of the income earned on related investments for unrestricted purposes. Temporarily restricted net assets Net assets subject to restrictions imposed by donor or law that may be met either by actions of the Foundation or the passage of time. Unrestricted net assets Net assets that are not subject to donor-imposed restrictions or law. (h) Revenue Recognition Unconditional promises to give are recorded as contributions revenue when the promise is received. Conditional promises are recorded as revenue once the conditions are substantially met. Contributions, grants, and bequests are recognized as either temporarily or permanently restricted if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. When restrictions are met in the same period as the contribution is received, the Foundation records the contribution and the expense as unrestricted. Contributions of assets other than cash are recorded at their estimated fair value. Contributions of services are recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. The Foundation received in-kind contributions of assets and services that are included in the accompanying statements of activities as follows: Contributions: Wish related $ 360, ,600 Professional services 13,223 Other 2,067 Total $ 362, ,823 Special event revenue: Internal special events $ 11,667 7,323 An internal special event is a fundraising event coordinated and staffed by Foundation personnel rather than a third-party support group or organization. It is designed to attract people for the purpose of raising mission awareness, for increasing funding from existing donors, and the cultivation of future donors. Internal special event in-kind amounts are donated items recorded at fair market value that are used in facilitating the event. Examples of such donated items are generally food, beverage, facility costs, and auction items. Program or supporting services expenses were recorded at fair value totaling $362,661 and $444,823 in 2013 and 2012, respectively. 11 (Continued)

14 (i) Income Taxes The Foundation is a not-for-profit organization exempt from federal income and Virginia taxes under the provisions of Internal Revenue Code (IRC) Section 501(c)(3) and Section 58.1 of the Code of Virginia. However, the Foundation remains subject to income taxes on any net income that is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the financial statements taken as a whole. The Foundation has adopted ASC Topic 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on de-recognition, classification, interest and penalties, disclosure, and transition. Management believes that no such uncertain tax position requiring accrual or disclosure exists for the Foundation at August 31, 2013 or (j) Functional Expenses The Foundation performs three functions: wish granting, fundraising, and management and general. Definitions of these functions are as follows: Wish Granting Activities performed by the Foundation that grant wishes to children with life-threatening medical conditions. Fundraising Activities performed by the Foundation to generate funds and/or resources to support its programs and operations. During the fiscal years ended, the Foundation incurred no significant joint costs for activities that included fundraising appeals. Management and General All costs not identifiable with a single program or fundraising activity, but indispensable to the conduct of such programs and activities and to the Foundation s existence, are included as management and general expenses. This includes expenses for the overall direction of the Foundation, business management, general recordkeeping, budgeting, financial reporting, and activities relating to these functions such as salaries, rent, supplies, equipment, and other expenses. Expenses that benefit more than one function of the Foundation are allocated among the functions based generally on the amount of time spent by employees on each function. 12 (Continued)

15 (k) (l) Management Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, valuation of investments and contributions receivable, accrued pending wish costs, net of attrition on pending wish costs and whether an allowance for uncollectible contributions receivable is required. Reclassifications Certain reclassifications have been made to the 2012 financial statement information to conform to the 2013 financial statement presentation. There was no impact on the previously reported net assets of the Foundation. (3) Fair Value Measurements (a) Fair Value of Financial Instruments Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the financial instruments shown in the following tables as of August 31, 2013 and 2012 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Foundation s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Foundation based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, and available observable and unobservable inputs. The Foundation has adopted ASC Topic 820 for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis (note 2). Overall Investment Objective The overall investment objective of the Foundation is to invest its assets in a prudent manner that will achieve a long-term rate of return sufficient to fund a portion of its annual operating activities and increase investment value after inflation. The Foundation diversifies its investments among various asset classes incorporating multiple strategies and managers. Major investment decisions are authorized by the Board s Audit and Finance committee, which oversees the Foundation s investment program in accordance with established guidelines. 13 (Continued)

16 Allocation of Investment Strategies At August 31, 2013, all of the Foundations s investments were held in either money market accounts or publicly traded mutual funds classified within Level 1 of the fair value hierarchy. All investments held at are redeemable on a daily basis. (b) Fair Value Hierarchy The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring and nonrecurring basis at : Fair value measurements at August 31, 2013 using Quoted prices in active Significant markets for other Significant identical observable unobservable August 31, assets inputs inputs Description 2013 (Level 1) (Level 2) (Level 3) Assets: Recurring: Investments: Mutual Funds: Domestic equity $ 34,144 34,144 Bonds 19,319 19,319 Money market funds 7,942 7,942 Equity securities: U.S. corporate equity securities 16,940 16,940 Total recurring 78,345 78,345 Nonrecurring: Contributions receivable 38,172 38,172 Total nonrecurring 38,172 38,172 Total $ 116,517 78,345 38, (Continued)

17 Fair value measurements at August 31, 2012 using Quoted prices in active Significant markets for other Significant identical observable unobservable August 31, assets inputs inputs Description 2012 (Level 1) (Level 2) (Level 3) Assets: Recurring: Investments: Mutual Funds: Domestic equity $ 83,312 83,312 International equity 14,057 14,057 Bonds 8,572 8,572 Money market funds 2,261 2,261 Total recurring 108, ,202 Nonrecurring: Contributions receivable 112, ,524 Total nonrecurring 112, ,524 Total $ 220, , ,524 For the valuation of certificates of deposit at August 31, 2012, the Foundation used significant other observable inputs, particularly dealer market prices for comparable investments as of the valuation date (Level 2). Total investment income, gains, and losses for the years ended consist of the following: Interest and dividend income $ 3,771 8,162 Realized and unrealized gains, net 21,584 2,207 Less investment expenses (371) (1,347) Investment income, net $ 24,984 9, (Continued)

18 (4) Contributions Receivable The following is a summary of the Foundation s contributions receivable at : Total amounts due in: One year $ 38, ,463 Gross contributions receivable 38, ,463 Less allowance for doubtful accounts (7,939) Contributions receivable, net $ 38, ,524 (5) Transactions with Related Entities The National Organization conducts national fundraising efforts for which cash and in-kind donations are received and shared with the Foundation. These funds represent revenues associated with: distributions from national partners, individual donation amounts collected via online and white mail donations, amounts for internal grants, travel, and training scholarships, amounts to fund the Adopt-A-Wish program, and other miscellaneous revenues. During the years ended, the Foundation received $564,134 and $445,360, respectively, from these national revenue streams. Conversely, the chapter pays amounts to the National Organization for annual dues, insurance, and other miscellaneous ancillary expenses that the National Organization pays on behalf of the Foundation. Amounts totaling $240,054 and $45,313 were paid to the National Organization at August 31, 2013 and 2012, respectively. Chapters who assist with the organization and granting of wishes from other chapters are paid a fee for service called the wish assist fee. Under this program, the Foundation received $701 and $2,775 for the years ended, respectively, which is recorded in the accompanying statements of activities as other income. Amounts due from and to related entities are as follows: Balance at August 31: Due from National Organization $ 87,858 81,666 Due from other chapters 100,702 14,105 Total due from related entities $ 188,560 95,771 Due to National Organization $ 58,757 Due to other chapters 12,332 17,542 Total due to related entities $ 71,089 17, (Continued)

19 Amounts due from the National Organization represent contributions remitted to the National Organization that are identified for the Foundation s use but were not yet transferred to the Foundation as of year-end. Amounts due from other chapters represent amounts paid in assisting other chapters with their wish granting. Amounts due to other chapters represent amounts owed to other chapters who have assisted in the granting of wishes for the Foundation. During 2013 and 2012, the Foundation received contributions, both cash and in-kind, from board members totaling $3,350 and $202,945, respectively. (6) Property and Equipment, Net Property and equipment as of consist of the following: Computer equipment and software $ 43,338 74,853 Office furniture and equipment 10,656 47,426 Leasehold improvements 2,013 2,040 56, ,319 Less accumulated depreciation and amortization (38,603) (109,556) Property and equipment, net $ 17,404 14,763 Depreciation and amortization expense totaled $1,223 and $3,437 for the years ended August 31, 2013 and 2012, respectively. (7) Accrued Pending Wish Costs The Foundation accrues for estimated costs of reportable pending wishes as unconditional promises to give when five certain, measurable wish criteria are met. Prior to meeting these five criteria, the wish is considered a conditional promise to give due to the inherent uncertainties surrounding these criteria and is therefore, not accrued as a pending wish liability. Reportable pending wish criteria include: 1. Receiving a referral 2. Obtaining the required medical eligibility form 3. Contact with the wish family has occurred to determine the prospective wish 4. Determination that the wish falls within the National Organization s wish granting policy 5. The wish is expected to be granted within the next 12 months The Foundation, as part of its estimate of accrued pending wish costs, also considers attrition on pending wish costs. An attrition rate is calculated by the Foundation by analyzing the trend of wishes that have been accrued for using the five criteria discussed above that have not been able to be completed within the past twelve months due to factors outside of the control of the chapter, such as the death of a child, the move of 17 (Continued)

20 the family out of the chapter s territory, or loss of contact with the family. As of August 31, 2013 and 2012, the Foundation had approximately 126 and 107 reportable pending wishes, respectively. (8) Leases The Foundation is obligated under various operating leases for offices and equipment, which expire at various dates through February 28, Total rent expense for all operating leases for the years ended totaled $94,630 and $108,378, respectively. Future minimum lease payments under operating leases having remaining terms in excess of one year are as follows: Operating leases Year ending August 31: 2014 $ 44, Total minimum lease payments $ 45,121 In January 2014, the Foundation extended the lease for the Richmond office space through February 28, (9) Endowments The Foundation follows the provisions of ASC 958, Section Reporting Endowment Funds. These provisions provide guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) and also require disclosures about endowment funds, both donor-restricted endowment funds and board-designated endowment funds. The Foundation s endowment consists of one individual donor-restricted fund. Net assets associated with endowment funds, including funds designated by the board of directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Endowment assets, both donor-restricted and board-designated, are reflected as investments held for long-term purposes on the statements of financial position. The Foundation has no funds designated by the board of directors to function as endowments. (a) Interpretation of Relevant Law The board of directors of the Foundation has interpreted the Virginia UPMIFA as requiring preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets: (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining 18 (Continued)

21 portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the Foundation and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the Foundation 7. The investment policies of the Foundation Endowment net asset composition by type of fund as of is as follows: 2013 Temporarily Permanently restricted restricted Total Donor-restricted endowment funds $ 13,349 49,936 63,285 Total funds $ 13,349 49,936 63, Temporarily Permanently restricted restricted Total Donor-restricted endowment funds $ 1,186 49,936 51,122 Total funds $ 1,186 49,936 51, (Continued)

22 Changes in endowment net assets for the years ended are as follows: 2013 Temporarily Permanently restricted restricted Total Endowment net assets, beginning of year $ 1,186 49,936 51,122 Investment return: Investment income 1,653 1,653 Net appreciation (realized and unrealized) 10,510 10,510 Total investment return 12,163 12,163 Endowment net assets, end of year $ 13,349 49,936 63, Temporarily Permanently restricted restricted Total Endowment net assets, beginning of year $ 5,795 49,936 55,731 Investment return: Investment income Net appreciation (realized and unrealized) Total investment return 1,186 1,186 Appropriation of endowment assets for expenditure (5,795) (5,795) Endowment net assets, end of year $ 1,186 49,936 51, (Continued)

23 Description of amounts classified as permanently restricted net assets and temporarily restricted net assets (endowment only): Permanently restricted net assets: (1) The portion of perpetual endowment funds that is required to be retained permanently either by explicit donor stipulation or by UPMIFA $ 49,936 49,936 Temporarily restricted net assets: (1) The portion of perpetual endowment funds subject to a time restriction under UPMIFA: Without purpose restrictions $ 13,349 1,186 Total endowment funds classified as temporarily restricted net assets $ 13,349 1,186 (b) (c) (d) Fund Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. There have been no such deficiencies in 2013 or Return Objectives and Risk Parameters The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the board of directors, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a moderate level of investment risk. The Foundation expects its endowment funds, over time, to provide an average rate of return of approximately 5% annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent constraints. 21 (Continued)

24 (e) Spending Policy and How the Investment Objectives Relate to Spending Policy The Foundation does not have a spending policy that mandates specific annual distributions. As operational needs are identified, the Board may elect to make distributions from the endowment assets. (10) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are available for the following purposes for the years ended August 31, 2013 and 2012: Wish granting $ 31,211 16,261 Time restrictions 51,521 97,449 Total temporarily restricted net assets $ 82, ,710 For the years ended, permanently restricted net assets are restricted to: Investments in perpetuity, the income from which is expendable to support any activities of the Foundation $ 49,936 49,936 $ 49,936 49,936 (11) Retirement Plan The Foundation has a defined contribution retirement plan (the Plan). Employees are eligible for participation in the Plan after reaching 21 years of age and upon completion of one year of service. Under the provisions of the Plan, eligible employees may elect to defer a percentage of their salary subject to certain IRC limitations. The Foundation does not match employee contributions and no contributions were made to the plan by the foundation for the years ended. (12) Concentrations of Credit Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash, cash equivalents, and investments. The Foundation places its cash and investments with high credit quality financial institutions and generally limits the amount of credit exposure not to exceed the FDIC insurance coverage limit of $250,000. From time to time throughout the year, the Foundation s cash balances may exceed the amount of the FDIC insurance coverage. In-kind contributions totaling $219,601 and $300,284 were received from a single donor for the years ended, respectively, which represents 11% and 20%, respectively, of total public support. Should these contribution levels decrease, the Foundation may be adversely affected. 22 (Continued)

25 (13) Liquidity The Chapter anticipates that its existing capital resources and cash flows from operations will be adequate to satisfy its liquidity requirements through fiscal year If available liquidity is not sufficient to meet the Chapter s operating obligations as they come due, management s plan includes increasing fundraising efforts or reducing expenditures as necessary to meet the Chapter s cash requirements throughout fiscal Additionally, the Make-A-Wish Foundation of America has committed to providing or sourcing the necessary funding, if any, to assist the Chapter in meeting their obligations. (14) Litigation and Claims The Foundation is involved in litigation and claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Foundation s financial position, change in net assets, or liquidity. (15) Subsequent Events The Foundation has evaluated subsequent events from the statement of financial position date through August 11, 2014, the date at which the financial statements were available to be issued. 23